This is the third entry in a three-part series on “big picture money management for architects.”
What kinds of exposure do architects live with? Contractual, liability, and financial. Let’s just talk about financial here. Our team of engineers is good and reliable. We also agree that we’re “pay when paid” in our all work. So far it’s been good. We agree that we’re in this together. The time when we share our exposure is when payment from the client is slow; we try to avoid that.
- We’ve taken a look at invoicing and streamlined it as much as possible. A clear, accurate invoice that is tied to the contract and is easily understood is more likely to get paid faster.
- At the beginning of a project, we’ll ask for the client’s criteria for submitted invoices: what’s required? job number? contract number? cost center? hard copy? electronic copy? We follow those “rules.”
- We get retainers upfront on all new clients; we stay on top of invoicing deadlines and stick to them. We try to set up all contracts as “cash transactions,” that is, when the particular drawings are complete, we get payment. We try not to extend any credit – ever. At least in Georgia, by allowing payments after the drawings are complete, you’ve extended credit by not specifically saying “payable upon completion of the work” (I know it’s goofy… that’s for another day).
- Sometimes, we’ll consider offering a 2% discount for payment net 10 if we need to extend credit (note: we really don’t like extending credit at all – ever).
- After invoices are sent we’ll follow up with an e-mail or phone call: “Did you receive it? Has it been entered for payment? Thank you!” This has head off “misdirected, lost 30 days” more times than I can count! Besides that, it’s another chance to chat with your client.
- Realize that ultimately “systematic and speedy” collections are perhaps the cornerstone of managing the financial risk exposure. When things don’t go right, take a look at a few articles by the SPP for more hints: http://aia.org/spf_nwsltr_0404 specifically “hire a black hat”
Ok, by now you should have a firm(er) handle on what you’re doing and what you need to be doing better. Anything you can share?
—Lisa Stacholy, AIA